The Ghana Revenue Authority has pushed back against warnings from spare parts dealers that a new tax system will increase prices, insisting the changes will instead lower costs for businesses and consumers.
In a statement issued February 10, 2026, the GRA responded to concerns raised by the Abossey Okai Spare Parts Traders Association, which had argued that the implementation of the Value Added Tax system under Act 1151 would distort the market and place an unfair burden on traders.
“The GRA takes the concerns of all taxpayers seriously and remains open to constructive engagement. However, the claims made in the Association’s statement reflect a fundamental misunderstanding of how the new VAT system operates,” the authority said.
At the core of the disagreement is how input VAT, the tax businesses pay on their purchases, is treated.
Under the now-defunct Flat Rate Scheme, traders paid 21.9 per cent input VAT that was non-recoverable and became a permanent cost.
The new standard VAT regime charges 20 per cent on sales but allows businesses to fully deduct the 20 per cent input VAT they have paid, reclaiming it from the tax authority.
To make its case, the GRA laid out a comparative calculation. For a product with a base cost of GH¢500 and a 20 per cent profit margin, the final consumer price under the old system was GH¢760.66.
Under the new system, after accounting for input VAT deductibility, the price falls to GH¢720.
“When input VAT deductibility is properly accounted for, the customer’s final price under the new regime is GH¢40.66 lower,” the statement read.
It attributed the perception of higher prices to traders mistakenly applying the new 20 per cent output VAT on top of a cost structure that still includes the old, non-recoverable input tax.
The GRA also pushed back on claims that raising the VAT registration threshold to GH¢750,000 would create an uneven playing field, describing the move as “a deliberate relief measure” for smaller traders.
It argued that whether a product is sold by a registered or non-registered trader, the final consumer price should be the same, since the registered trader’s ability to claim back input VAT offsets the output tax charged.
The authority pointed to several advantages under the new regime, including a lower overall tax rate, the removal of the COVID-19 Health Recovery Levy, and the elimination of cascading taxes.
“The reform reduces the cost of doing business,” the GRA said, estimating that on a GH¢500 purchase, a trader’s cost base drops by nearly 18 per cent.
